Liquidnet, the provider of institutional block crossing networks, says it plans to introduce its algorithms to its Asian businesses in 2014.
The firm already offers algorithms in the USA and Europe. The suite includes Liquidnet participation, average price, implementation shortfall and Liquidnet Dark. The latter is an aggregation algorithm that looks for liquidity across dark pools.
To facilitate the product expansion, the firm will increase its Hong Kong team by a modest number of new staff, and that will necessitate having to find bigger Hong Kong premises shortly.
In Asia, Liquidnet already covers ten markets. The most recently introduced is Thailand, whose introduction we reported last month.
Liquidnet aspires one day to open up in India, a complex ID market with no off-market crossing mechanism.
“Our clients would like us to be in India because it is such a tough market to trade. There is information leakage, the market finds out about trades and clients get adverse price movements,” says Lee Porter, Liquidnet’s Asia Pacific managing director.
Other absentees in its Asian roster are Taiwan and Mainland China. Porter explained that it is a delicate process of building bridges in the Asian countries in which it seeks to offer its product.
“We have to build relationships with the exchange and regulator, and show we are not a threat. We aren’t. We report to the exchange and increase the overall volumes values traded. There are differences between our business and traditional exchange business. Our typical size is over US$1 million whereas theirs might be US$10,000 per trade. Their clients are brokers, ours are always buy-side investors.”
There are now 230 institutional clients on its Asian platform. During the first quarter of 2012, daily liquidity on the Asian Liquidnet platform rose from an average US$8.4 billion to US$10.4 billion.
Eighty percent of the time Liquidnet clients trade at a mid-price, and the rest of the time at bid/offer. Trades are reported to the exchange immediately. Liquidnet receives ten basis points per trade from both buyer and seller. At a combined fee of 20 basis points, therefore, Liquidnet tends to come in somewhere between the fee levels of a full-service brokerage rate and a low-touch trade.